Auto insurance fraud in New York is suffocating the state's insurance industry, driving up costs for all consumers.
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"Rampant
fraud and abuse and excessive attorney involvement in claims" are to
blame in large part for rate increases, says Robert Hartwig, Insurance
Information Institute vice president and chief economist, whose
assertions are supported by studies by the Insurance Research Council
(IRC).
Becoming most expensive is personal injury
protection (PIP), which pays for any medical costs that you or your
passengers incur if you are in an accident. Since New York is a
"no-fault" state in which your own insurance
pays for your medical expenses regardless of who is at fault, you are
required to buy PIP. The IRC says the average amount paid for PIP
claims rose by 20 percent in New York in 2000, compared with only 6
percent in other states with no-fault laws.
Auto insurance fraud is forcing up
insurance costs for everyone in New York, but those who are hit
particularly hard are in the high-risk auto insurance pool. According
to the III, applications for the New York Auto Insurance Plan — the
insurer of last resort for high-risk drivers in the Empire State —
increased 62 percent from 1999 to 2000.
Specifically, the incidence of fraud
went up in New York City, which drives up rates for the state as a
whole. According to the IRC, one out of every four New York City PIP
claims "appeared to involve some kind of fraud or buildup, either the
exaggeration of medical expenses, unnecessary treatments, or padding
claim-related costs."
In New York City, claimants were much
more aggressive when making claims, from the number of injuries in an
accident, to the use of specialists, to the speed with which they hired
a lawyer. They were also more likely to take advantage of longer time
limits allowed for filing claims.
Under New York law, claimants have 90
days to report an injury and 180 days after treatment to submit a
medical bill, but insurers have only 30 days in which to pay a bill or
dispute it, even if fraud is suspected.
New York Gov. George Pataki has
proposed addressing at least one of these issues by reducing the time
allowed for submitting no-fault medical bills from 180 days to 45, but
that proposal continues to be tied up in court challenges.
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